Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a smartphone. The cost structure to manufacture 20,000 Tri-Robos is as follows. Cost Direct materials ($50 per robot) $1,000,000 Direct labor ($40 per robot) 800,000 Variable overhead ($6 per robot) 120,000 Allocated fixed overhead ($30 per robot) 600,000 Total $2,520,000
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a smartphone. The cost structure to manufacture 20,000 Tri-Robos is as follows.
| Cost | |||
|---|---|---|---|
| Direct materials ($50 per robot) | $1,000,000 | ||
| Direct labor ($40 per robot) | 800,000 | ||
| Variable overhead ($6 per robot) | 120,000 | ||
| Allocated fixed overhead ($30 per robot) | 600,000 | ||
| Total | $2,520,000 |
Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $115 per unit or $2,300,000.
Following are independent assumptions.
(A2) Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Jobs can use the released productive resources to generate additional income of $375,000. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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